Quarterly report pursuant to Section 13 or 15(d)

Fair Value Measurements

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Fair Value Measurements
 3 Months Ended
Mar. 31, 2021
Fair Value Disclosures [Abstract]  
Fair Value Measurements

5. Fair Value Measurements

 

Financial Instruments Measured and Recorded at Fair Value on a Recurring Basis

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. Fair value is based on the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, under a three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value as follows:

 

  Level 1 - quoted market prices for identical assets or liabilities in active markets.
     
  Level 2 - observable prices that are based on inputs not quoted on active markets but corroborated by market data.
     
  Level 3 - unobservable inputs reflecting management’s assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

 

The Company classifies assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. No financial assets were measured on a recurring basis as of March 31, 2021 and December 31, 2020. The following tables set forth the financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy as of March 31, 2021 and December 31, 2020 (in thousands):

 

    Fair  Value Measurements as of March 31, 2021  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 1,285     $ 1,285  

 

    Fair Value Measurements as of December 31, 2020  
Description   Level 1     Level 2     Level 3     Total  
Derivative liability                                
Common stock warrants   $ -     $ -     $ 1,238     $ 1,238  

 

The Company did not have any transfers of assets and liabilities between any levels of the fair value measurement hierarchy during the three months ended March 31, 2021 and 2020 (in thousands).

 

    Common  Stock
Warrants		  
Balance as of December 31, 2019   $ (220 )
Issuance of derivatives     (6,328 )
Change in fair value     4,166  
Exercise of warrants     1,556  
Balance as of March 31, 2020   $ (826 )
         
Balance as of December 31, 2020   $ (1,238 )
Change in fair value     (242 )
Exercise of warrants     195  
Balance as of March 31, 2021   $ (1,285 )

 

Common Stock Warrants

 

The Company has issued certain warrants to purchase shares of common stock, which are considered derivative liabilities because they have registration rights which could require a cash settlement and are re-measured to fair value at each reporting period in accordance with accounting guidance. As of March 31, 2021, and December 31, 2020, the derivative liability was calculated using the Monte Carlo Simulation valuation.

 

The assumptions used in estimating the common stock warrant liability as of March 31, 2021 and December 31, 2020 were as follows:

 

      March 31, 2021       December 31, 2020  
Weighted-average risk-free interest rate      0.05%-0.70 %      0.09%-0.27 %
Weighted-average expected life (in years)      0.38-4.07        0.63-4.10  
Expected dividend yield     - %     - %
Weighted-average expected volatility     137.8%-178.1 %      138.3%-175.6 %

 

Other Financial Instruments

 

The Company’s recorded values of cash and cash equivalents, account and other receivables, accounts payable and accrued liabilities approximate their fair values based on their short-term nature. The recorded value of notes payable approximates the fair value as the interest rate approximates market interest rates.